Maybe look for the devil in the details

Maybe look for the devil in the details
by gregmorrissey (2024-01-30 22:25:06)
Edited on 2024-01-30 22:34:16

In reply to: Because of the Jones Act there is no such thing as posted by Raoul

and be a little more skeptical of the partisan take when the news story seems to be such a slam dunk "Biden's an idiot, Green New Deal, blah blah blah".

Biden is a career politician; and, in spite of his "off the cuff" deterioration, his administration hasn't generally stepped straight into the doo doo with unforced errors. So, which of the following do you think is the more likely possibility?

1 - The Biden administration, without consideration of the negative national & global outcomes, unilaterally halted new permits without input from the O&G industry only to appease the "progressives" and totally clueless that the Republicans would be able to use this in every political ad between now and November.

2 - The Biden administration, in conference with the established players in the O&G industry, recognized a "win-win" situation where they announce a temporary permitting halt to appease the "progressives", and the O&G industry receives some cover to assess the massive amount of supply coming on the market in the next few years and hopefully avoid a catastrophic price collapse. Biden gets to look like he's standing up to Big Oil and protecting the environment. Big Oil gets to complain that projects are delayed because of Biden and not because of over-supply fears or ineffective capital raising.

I did the simplest five-minute Google search on "lng permit pause" and the following were in the Top Stories section of the results. I'll concede that I didn't vet the source so it's possible these are all left-wing rags putting lipstick on this pig. Please note that all articles cited the huge expansion of LNG capacity that is coming online over the next few years that is unaffected by this pause. I find it hard to believe that this pause will have any impact at all on the LNG supply as all affected projects will continue to move forward with the expectation of the permitting process re-opening within 12 months.

All emphasis below are mine.

Forbes: What The President’s Permit Pause Means For The Golden Age Of Liquefied Natural Gas.

The golden age of LNG has come about because of the need for energy security for the EU after Russia’s war on Ukraine, as well as LNG displacing coal-fired power plants in Southeast Asia and China. An insightful article by Bloomberg epitomizes this LNG boom. QatarEnergy and its backers are investing $45 billion (yes that’s billion) to expand the country’s LNG exports, although its already one of the top three LNG exporters in the world – along with Australia and the U.S. A Japanese firm building the expansion has enlisted 30,000 workers from 50 countries.

Four other huge LNG expansions are planned in Louisiana and Texas: Plaquemines, Rio Grande, Port Arthur and Golden Pass. In a few years, by adding 80 million tons of capacity, the U.S. will separate as the top LNG exporter.

Can the fed pause in LNG impact the LNG industry? Yes, according to Bloomberg. The development of an LNG project is fraught with uncertainties, especially the lengthy timeframe of LNG. LNG developers in the U.S., such as Cheniere, try to get contract commitments from customers that last 10 years or even longer – before they go about finding investors in a new project. But they understand if they expand too fast they risk a glut in the market. If they move too slow, they risk the market switching to coal. The fed pause kicks in a new uncertainty about the future of LNG.
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Does this disable the golden age for LNG? No, as projects that have been permitted won’t be affected directly. Almost 50 billion cubic feet per day (Bcfd) have already been approved for the U.S., which is 3.4 times greater than current capacity, so this huge boost won’t be affected. This will assuage concerns from the EU and Southeast Asia about their plans for energy security based on cleaner LNG rather than coal.

However, the Calcasieu Pass 2 LNG project has been paused which is significant because it was due to go online in 2026 as the largest LNG export plant in the U.S. Surprisingly, alone it would liquefy roughly 4% of U.S. natural gas that was produced in 2022.

The U.S. exports 5 Bcfd to Mexico by pipeline. Some of this gas is used to make LNG in the country’s liquefaction facilities. It’s ironic that U.S. natural gas will be used to support Mexico’s LNG exports that might get a boost due to the DOE pause in U.S. LNG exports.

Reuters: Companies most affected by US pause on LNG export permits

The following is a list of companies potentially impacted by the announced suspension on new export-permit approvals:
- Commonwealth LNG has been waiting since November 2022 for approval for its 9.3 million-metric-tonnes-per-annum (mtpa) LNG export facility in Cameron, Louisiana. The firm has reached agreements for just about 50% of capacity and was targeting a final investment decision this year.
- Sempra's (SRE.N), Port Arthur, Texas, LNG's trains 3 and 4, capable of producing up to 13.5 mtpa, applied for authorization from DOE in September 2023. The facility's Phase 2 represents an expansion on the already producing first phase.
- Energy Transfer (ET.N), re-applied for an export permit for its Lake Charles LNG facility in Louisiana after its original permit expired without completing construction. It sought a new non-FTA license in August 2023.
- Glenfarne Group's Magnolia LNG, which expects to produce 8.8 mtpa of LNG at a facility in Louisiana, also refiled its permit, but the company has not provided details on dates. The project has not moved forward.

Two other LNG projects are awaiting U.S. Federal Energy Regulatory Commission (FERC) approvals, which must be received before the DOE will consider an export permit. The soonest FERC could vote would be in February. If approved by FERC, the two also would also be subject to the export-permit moratorium.
They are:
- Venture Global LNG's Calcasieu Pass 2 plant, part of a proposed 20 mtpa expansion of its existing Louisiana facility. It is awaiting FERC approval to begin construction.
- Cheniere Energy's (LNG.A), Midscale Trains 8 and 9 project, which is in an early filing stage before the FERC. It also would be subject to the DOE's study if the project is approved by FERC.

Fox Business: Business groups from US, Europe and Japan push back on Biden LNG permit pause

The Biden administration, acting through the Department of Energy (DOE), implemented a pause on new LNG export authorization requests to consider whether exports to non-FTA countries are in the public interest. The move doesn’t impact previously approved export applications and the DOE noted that the U.S. currently has the capacity to export 14 billion cubic feet of LNG per day, with 48 billion cubic feet in total authorizations approved.

"The administration is committed to the affordability of energy and economic opportunities for all Americans; ensuing energy security here in the U.S. and with our allies; and protecting Americans against climate change and winning the clean energy future," Secretary of Energy Jennifer Granholm said in a statement announcing the pause. "This practical action will ensure that DOE remains a responsible actor using the most up-to-date economic and environmental analyses."

E&E News by Politico

Administration officials on a call Thursday downplayed the gravity of what they call a “process update” that will heighten scrutiny of whether a terminal is within the “public interest.”

Granholm said LNG capacity in the U.S has tripled since the last time a full review of the underlying analyses was done six years ago.

She stressed the pause only applies to pending applications for exports to countries without U.S. free-trade agreements — which includes Europe — until the department can update the underlying analyses for authorizations.

DOE conducts the national interest determinations and the Federal Energy Regulatory Commission permits the terminals themselves.

One official said the pause would not delay the Calcasieu Pass 2 project, or CP2, in Louisiana, seemingly contradicting the New York Times and other reporting. That project is set to increase shipments from the U.S. by about 20 percent and is under FERC review.

“There will be no impact on CP2 from this pause,” said the administration official granted anonymity to speak candidly.

However, a DOE spokesperson later clarified the increased scrutiny will affect all “current and future pending applications,” which would include CP2.
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“We remain committed to ensuring our partners’ medium-term energy needs are met, and if needed, the department can determine if exceptions should be made for national security needs,” Granholm said Thursday.
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Manchin, who almost never sees eye-to-eye with the administration on energy, said Thursday a pause could be appropriate if “done in a reasonable way.”

“If they do something reasonable that says, ‘We’re pausing right now before we continue to admit others,’” he said. “Well, fine, let’s put a time period on a pause. Let’s find where we are — what our reserves are, our production capacity and if we’re overcharging the market or not.”

Sen. Angus King (I-Maine) argued the DOE decision might bode well for American consumers. He said in a statement that “it only makes sense to review the impacts on consumers, the environment and domestic manufacturing as required by law before determining if additional exports are in the national interest.”

Time: What to Know About Biden’s Move to Pause New LNG Export Terminals

The decision is complicated because Biden has praised U.S. exports in the past. But he has faced strong criticism from environmental groups who worry about the rapid expansion of LNG exports in recent years and question Biden's commitment to phasing out fossil fuels such as oil and gas. U.S. oil production has surged since Biden took office.

U.S. LNG capacity has doubled in recent years and is set to double again under projects already approved, the White House said. Current methods the Energy Department uses to evaluate LNG projects don’t adequately account for potential cost hikes for American consumers and manufacturers or the impact of greenhouse gas emissions, officials said.

"There’s a long runway here (for LNG projects) and we’re taking a step back and thinking, okay, let’s take a hard look before that runway continues to build out,'' said White House climate adviser Ali Zaidi.
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The pause will have no immediate effect on U.S. gas supplies to Europe or Asia, she said. Seven LNG terminals are currently operating in the U.S., mostly in Louisiana and Texas, with up to five more expected to come online in the next few years. Biden's action would not affect those projects, but could delay a dozen or more LNG projects that are pending or in various stages of planning. That includes the Calcasieu Pass 2 project, or CP2, along Louisiana’s Gulf Coast. If built, CP2 would be the largest export terminal in the United States.

Corpus Christi Caller Times: Cheniere taking Biden administration's LNG export terminal 'pause' in stride

The Biden Administration placed a hold on the nation’s pending liquid natural gas (LNG) export terminal projects citing concerns over climate impacts. Despite that move, the company building an LNG project in the Coastal Bend said Friday that it doesn’t think this pause will make a huge impact the long run.

“Cheniere supports a clear, fair and robust permitting framework and believes any delay or disruption to it risks injecting uncertainty into the U.S. regulatory environment,” Cheniere spokesperson Bernardo Fallas said. “Nonetheless, we are confident we will continue to secure all regulatory approvals for our expansion projects within our expected timelines, as we have for more than a decade under multiple administrations.”

The Corpus Christi Liquefaction facility is located on Corpus Christi Bay in San Patricio County.

“It bears reinforcing that we expect this pause to have no impact on the overall timelines for our expansion projects, including the CCL Midscale 8 & 9 Project you cite,” Fallas told the Caller-Times via email Friday. “As with any project, we will reach FID (final investment decision) once we reach all of our investment and commercial parameters. Similarly, we expect no impact to our CCL Stage 3 Project, which is under construction and currently ahead of schedule.”

The developer of a similarly-affected Port Arthur LNG project said it, too, will press forward.

"Sempra Infrastructure remains confident in the merits of its proposed projects, which include helping to displace more carbon intense fossil fuels such as coal and fuel oils and supporting national security goals through providing access to U.S. natural gas to our allies in Europe and Asia," said spokesperson Kym Butler via email. "Additionally, we continue to develop opportunities to reduce the carbon intensity of the LNG produced at our facilities."

Sempra is developing two carbon sequestration projects as well, Butler said which could could reduce other industrial emissions near their facilities.

"We remain committed to working with regulators and stakeholders to help ensure positive outcomes for our projects, customers, and the communities in which we operate and look forward to the opportunity to review and comment on any proposed policy change as it relates to non-FTA permits," Butler said.

No one here in this thread made the argument that Biden was

stopping all construction. This discussion has always been about future projects not yet approved. But that is a nice strawman for try to suggest arguments against this are nothing but "Biden's an idiot, Green New Deal Blah, Blah, Blah."

Your post assumes away the issue caused by the pause by saying the substantial capacity that is already coming online in the next several years is good enough for the global natural gas industry. Good to know you have already reached that conclusion after some Googling, even the Biden Admin has not made such a conclusion.

Your suggestion of a back room deal with the industry and a Kabuki Theater reaction is simply ridiculous and unsupported by any reporting by anyone.

My own dramatization aside, I didn't assume anything

It was spelled out in the articles I linked and cited that the companies involved did not think they would be affected by this pause, and they were moving forward with their planned projects.

Corpus Christi Caller Times: Cheniere taking Biden administration's LNG export terminal 'pause' in stride

As for the supply, the moderate Democrat that Republicans view as the ideal Democrat, Joe Manchin, intimated concerns about the coming supply.

Manchin, who almost never sees eye-to-eye with the administration on energy, said Thursday a pause could be appropriate if “done in a reasonable way.”

“If they do something reasonable that says, ‘We’re pausing right now before we continue to admit others,’” he said. “Well, fine, let’s put a time period on a pause. Let’s find where we are — what our reserves are, our production capacity and if we’re overcharging the market or not.”

The only people mentioning that it will cause an issue appear to be people who profit politically (politicians) or whose job it is to "protect" the O&G industry (trade groups). The Biden Administration was very clear that this policy could be reversed quickly if national security issues change. It's a permitting process that's one step in a very complex equation, and which occurs after other government approvals have already been received. As I cited in my post, two projects had permits expire because they hadn't even started construction. Expiring permits tells me the supply situation is not so dire that taking six to twelve months to update the data used in the approval process makes sense.

EDIT TO ADD: I also found it interesting that the pause announcement was made after the Brownsville, TX permits were approved. This article confirms there are four projects at the DOE approval stage which are affected (two of which were previously approved but the permits expired). These projects were listed under the Reuters article in my original post. Basically, any project that is ready to move forward was approved, further confirming that this pause will have negligible effect on export supply.

Another article laying out the facts:
Biden Administration Freezes LNG Export Approvals

As for the strawman, you might re-read my post. I didn't suggest those were arguments against. I suggested those were the first responses from the other side. My point was that when those responses seem to fit a little too cleanly then I'm naturally suspicious that they match the reality. As expected, in this situation, they don't fit the reality of the situation at all.

This seems to provide good context for the issue...

...Good work.